Slower China, plunging gold batter miners

Weak Chinese growth data and a tumbling gold price triggered a sell-off in resources companies on Monday, as the Australian sharemarket slumped below 5000 points.

The benchmark S&P/ASX 200 Index closed down 45.6 points, or 0.91 per cent, at 4967.9 points.

Gold miners were hammered as the gold price fell 2.2 per cent to $US1450.11 on Monday afternoon, after falling 5 per cent on Friday.

Australia’s biggest gold company, Newcrest Mining, plunged 8.2 per cent to $17.92, its lowest close in more than four years.

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Lower than expected Chinese growth also weighed on sector heavyweights with BHP Billiton falling 3.1 per cent to $32.31, Rio Tinto down 3.2 per cent to $55.09 and Fortescue Metals Group dropping 6.2 per cent to $3.76.

The sharemarket clawed back some losses early in the session until data released by the National Bureau of Statistics showed an unexpected slowdown in the Chinese economy.

“It was weaker than we expected, and that’s why you’ve seen such a sell-off in markets," said National Australia Bank group chief economist Alan Oster. “We’ll have to revise our growth numbers for the Chinese economy."

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Mr Oster said the poor result meant Chinese GDP growth would likely be 8 per cent for the year, rather than a previously forecasted 8.25 per cent.

Australia’s economy is highly dependent on China’s demand for commodities.

Rio also warned on Monday that 1300 jobs were at risk after the Land and Environment Court overturned an approval for the expansion of one of its mines in the Hunter Valley.

Among gold stocks, small to mid-sized gold equities were also in freefall.

St Barbara lost 13.5 per cent to close at 90¢, Alacer Gold dropped 11.8 per cent to $3.07 and Northern Star Resources plummeted 12.9 per cent to 77.5¢.

Alleron Investment Management senior investment manager Steven Robinson said the losses in the gold sector were primarily due to the falling bullion price.

“Gold stocks were all down quite significantly," he said. “The gold price was down again in Asian trading."

Mr Robinson said the market’s savage treatment of mining stocks in response to the Chinese GDP data may have been an overreaction.

“Despite the poorer than expected numbers, China’s still growing and I think the key is to look longer term at what’s sustainable and to look for those companies that have strong positions in their markets and can continue to grow despite short-term volatility and demand in prices."

He said the downward trend for these companies had been a theme for the past year.

“There was a large and short-term impact today, but I think it’s a trend that’s been developing for a while."

The banks continued to grind higher with Commonwealth Bank of Australia up 0.66 per cent at $68.51 and National Australia Bank rising 0.47 per cent to close at $31.77.

Westpac Banking Corp fell 0.22 per cent to $31.59 and ANZ Banking Group dropped 0.28 per cent to $28.79.

Telecommunications was the best-performing sector on a day for defensive stocks.

Telstra lifted 0.87 per cent to $4.65, and Singapore Telecommunications, owner of Optus, was up 0.73 per cent at $2.76.

Bad news out of China overshadowed positive domestic data.

Home loans jumped across the nation in February by the most in 14 months.

The number of dwelling loans rose 2 per cent from January, snapping a four-month run of declining approvals, the Australian Bureau of Statistics said on Monday. The Reserve Bank of Australia slashed interest rates by 1.75 per centage points between late 2011 and December 2012.

“This is another sign that there’s some increase in approvals, and says that the housing market is one area where interests rates have had a positive effect," Mr Oster said. “We still think we’re going to get at least one more cut because we think unemployment is going to go north."

The Australian dollar also came under pressure from the poor Chinese data. It fell 0.6 per cent to $US1.04, late on Monday afternoon.